The turmoil in the financial markets is likely to cost 10,000 jobs in the City this year, as banks retrench.

The forecast is an upward revision from the Centre for Economic Business Research, which suggested just three months ago that job losses in the City would reach only 6,500 this year.

Doug McWilliams, chief executive of the CEBR, warned that the total could yet rise again. The economic research group publishes data on the City twice a year, and is due to report again early next month. "Obviously the world moves on. Previously we thought it would be a slightly more limited number of jobs that would be lost but confidence is rather weaker than we assumed. On what we can see now, the number of job losses will be higher. It is all to do with confidence, and confidence is one of these things which is tremendously fragile and volatile. The number could yet change."

Several thousand jobs have already been cut at banks including Citigroup, Morgan Stanley, Goldman Sachs, Deutsche Bank and Merrill Lynch.

If the current projections are correct, they would still fall shy of some of the worst turbulence in the City's history. About 40,000 banking jobs were cut in the recession of 1991-92 and 20,000 in the wake of the technology crash of 2001-02.